Set off of capital loss on of sale of agriculture land

Tax queries 1936 views 3 replies

Kaartic Jeyaraman

Managing Partner

32 Points Posted on 02 December 2013

Dear Professional Colleagues,

I have a query regarding setting off and carry forward of loss arising on account of sale of Agriculture Land. It would be of great help if you can help me with your valuable suggestion.

Query :

In case of Loss arising out of a sale of an Agriculture Land, can such loss be set off or be carried forward against any other LTCG or any other Income ?

- AO takes a stand that as the Income of the Agriculture Land was exempt any LOSS aring out of sale of such asset CANNOT be setoff or carry forward, is this stand take by assessing officer is correct ? His contention is LOSS ARISING OUT OF EXEMPTED ASSETS CANNOT BE SET OFF OR CARRIED FORWARD - Kindly suggest.....

Can you help me with your valuable suggestions and also is there any case law in this regard ?

Thank You.

Regards,

Kaartic Jeyaraman.

Replies (3)

TKKKKKK

PRACTICING CA

3272 Points Posted on 02 December 2013

Agriculture land is also capital asset if it is located in specified area. Loss on transfer of agriculture land is eligible to set off.If transaction is compulosury aquisition of agriculture land, capital gain will be exempt.

sarath

82 Points Posted on 04 December 2013

This is A General Logic Under Income Tax Act.

Say in Your Case,, Had If You have Got Gains, I.e Capital Gains,, Do you Pay Tax?

If The Answer is No, I.e If you Claim that Agriculatural Land is Rural Agricultural Land & Not Chargeable to Tax, Then Your Loss also will not be Allowed for Set Off.

Othewise, If your Gains are Taxable,, I.e Your Land is Situated in Uraban Area, Then Your Loss is Eligible for Carryforward or Set- off.

To Know what is Rural or Urban Agricultural Land,, You can refer Sub section (iii) of Section 2(14) Of Income Tax Act on this Link:https://www.exploreincometax.com/Indian-Income-tax-Act-1961/Section-2-14

kanagaraj

CHARTERED ACCOUNTANT

793 Points Posted on 07 December 2013

The AO is wrong. Here I reproduce the para from the book published by the IT dept.

Loss from transfer of a short term Capital Asset can be
set off against gain from transfer of any other capital asset
(Long Term or Short Term) in the same year. Loss from transfer
of a Long term Capital Asset can be set off against gain from
transfer of any other long term Capital Asset in the same year.
If there is a net loss under the head “Capital Gains” for an
assessment year, the same cannot be set off against any other
head of income viz., Salaries, House Property, Business or
Profession or other sources. It has to be separated into Short
term Capital Loss (STCL) and long term capital loss (LTCL)
and carried forward to next assessment year. In the next year,
the STCL can be set off against any gains from transfer of any
capital asset (Long term or Short term) and the LTCL can be
set off against gains from transfer of long term capital asset
only. Any unabsorbed loss after such set off can be further
carried forward to next assessment year.
Capital loss computed in an assessment year can be
carried forward for eight assessment years and set off as
above